8 Lessons From Bootstrapping A Hosting Company

8 lessons from bootstrapping a hosting company

SSD Nodes is different, in many ways, from the other VPS providers you might have heard about or used in the past. I've built the entire business without funding from investors, which means we've been entirely bootstrapped since 2011. Instead of using our profit to satiate investors, we can funnel that cash directly back into the business to fuel the next iteration of our underlying technology, features, and staff necessary to run the operation and find new customers.

Bootstrapping isn’t always the easiest way to build a business, much less a successful VPS hosting company, but it allows us to stay fully committed to your needs and our passions, rather than those of a board of directors. And, over the last seven years, I’ve learned lessons the hard way—by executing, measuring results, recovering from failure, and trying again.

Maybe I can help other bootstrappers or “indie hackers” escape the same hiccups. Or, just maybe, you’re curious to take a small look inside how your hosting provider runs itself.

1. Start small and iterate

Bootstrapped companies are often on the small side, which means that taking risk can have an enormous impact on the bottom line, or even send the company spiraling toward shutdown. Starting small means making the right decisions to lower your risk now and extend that runway.

Instead of launching with 50 mediocre products, is your business capable of doing one or two products really well?

For the longest time, SSD Nodes sold a few variations on a single product: virtual private servers based on OpenVZ. That’s changed, of course (we now sell servers based on KVM!), and there were a few hiccups along the way, but we’ve always been most successful when we’ve streamlined our product offerings and focused on creating the best possible experience and delivering the most value.

Don’t shy away from having a minimal set of features, too—the MVP is still going strong. It’s more than OK to launch with a small set of features, get customers, get feedback from them, and then iterate to build more features that your customers will want to use.

One of the reasons we’re still relatively light on features is that we are constantly examining what SSD Nodes customers actually want in an ever-shifting VPS hosting climate. Bootstrapped businesses should always invest heavily in acquiring customer feedback to guide this decision-making process and only move forward when they’re confident in a particular feature’s short- and long-term value—both to the business and to the customers.

2. Ignore the anti-moonlighting vibe

The startup world is overrun with anecdotes about venture capitalists resoundingly reject founders who are also moonlighting (as in working a day job for cash to pay bills and fund their startup). Their reason? A lack of commitment to the business.

As a bootstrapper, you’re trying to build your business, not pander to potential investors. Ignore the rumors, whatever they might be, and worry about transitioning away from moonlighting to working on your bootstrapped startup later, when the finances actually make sense.

That’s how I handled SSD Nodes for years. A day job kept the lights on and gave me a safety net to make the smart, iterative risks that the business needed.

3. Take calculated risks

Speaking of risk—I’ve seen companies fall into the trap of either taking too much risk and not taking enough risk. Risk means trying new things, whether that’s new products, hiring key talent, securing financing, and so on.

You'll over-leverage yourself if you take too many chances. Conversely, fail to take enough risk and you’ll never see growth.

My recommendation is to take enough risk to move the business forward, experiment and learn, but not so much risk that you’re betting the entire company on any one or two decisions.

If you have the capability and enough traffic to make things statistically significant, AB testing can help you take a risk without betting the farm—only half of it.

4. Create a framework to learn from failure

We’ve taken risks here at SSD Nodes, particularly around new products, that didn’t turn out the way we would have liked. Virtuozzo Containers, which we launched in early 2017, turned out pretty poorly.

Fortunately, we had created a framework, so to speak, to collect user feedback both via surveys and by aggregating data from our support tickets to understand the most persistent pain points in using these new Containers-based servers. Customers were telling us they wanted a more modern, Docker-compatible kernel, which the Containers platform offered, but without the instability.

We also organized our engineering team around continually assessing the impact of a less-than-perfect infrastructure. We analyzed how much it cost us in additional support, engineering work, and dealing with vendors. In the end, we not only learned that Containers weren’t for us, but also had some rough financial targets that the next platform needed to hit to be viable.

Because we had these frameworks in place, our following KVM product came out much better. More than a year later we’re selling them faster than ever.

5. Learn how to make fast, high-quality decisions

As a bootstrapped business, you’re resource-constrained, which means you need to be right more often than you’re wrong.

But if you let your fear of being wrong too often hold you back, you’re going to either micromanage or over-analyze your decisions to the point of failing to make them.

Since speed is essential for a bootstrapped company, either of these outcomes will send you spiraling toward failure.

Remember that you can reverse most decisions. Very few are irreversible.

6. Don’t hire too late

For years I was working on all aspects of SSD Nodes by myself. Engineering and marketing and everything in-between. It was nearly impossible for me to spend time on the business.

Instead, I was working in the business. And not hitting the necessary milestones to encourage growth.

The longer I waited to hire, the more difficult I found it to transition from working “in” the business to working “on” the business.

I would guess many bootstrapped founders are in the same boat.

I made the hiring move too late, but all wasn’t lost—with the right people and more practice on how to manage them, we’ve turned things around, and I’m fully committed to working on SSD Nodes at this point.

There are no hard and fast rules for when to hire. Hiring too fast can lead to waste, or having inefficient teams with not enough to do. Making a wrong choice just to fill a role can mess up your culture. My recommendation is to regularly examine how you perceive making that transition from “in” to “on.” Too easy and you’re probably not ready, too hard and you’ve moved too late to offload some of your work.

If you’re on the hard side, don’t worry—you might not have hit the optimal time, but unless your business is really trending downward, a smart, versatile hire at any time should help you refocus and contribute more meaningfully to steering the ship back toward growth.

7. Don’t hire experts

It sounds insane, I know.

As a small bootstrapped business, you’ll need people who are very flexible working on different parts of the company. You don’t need experts who have a single, highly-specialized area of focus.

You need someone who can write copy and throw together a basic display ad, not someone who has spent the last fifteen years perfecting leaderboard ads on baseball forums. Instead, you should be looking for people who are experienced in multiple, related things and give them opportunities to flex their varied talents.

8. Embrace constraint, because it leads to creativity and innovation

I’m glad I’ve been working on SSD Nodes full-time for a while now, but the early years, when I was moonlighting while holding down a day job, were incredibly formative.

Because I only had a few hours before and after work to get anything done, I was highly constrained. If you’re like me and have time for only one major project at a time, you’re going to make sure it’s the project with the highest possible impact.

Constraints often lead to great outcomes, but what’s business but a series of constraints?

You’ll find yourself clear of one only to walk right into another. With each new crunch, take some time to assess how you’ve handled previous constraints and create a roadmap for how you’re going to tackle the challenge and what you’re going to learn from it.

Now, with a handle on risk-taking, frameworks for learning, and versatile hires, you should be positioned even better to take on that next constraint with aplomb.